Paul Ryan: #ConservativeFail

What, pray tell, is House Speaker Paul Ryan thinking? He is working like a beaver to bail out Puerto Rico's banana republic fiscal situation and manipulating the bailout on behalf of a handful of corrupt, Romney-donor hedge funds. These funds opportunistically bought worthless, subordinated Puerto Rican bonds and are counting on Ryan to change the rules so that their bonds will be senior. If successful, Ryan's move will net them a fortune. This behavior is chipping away at the country's economic stewardship.

The U.S.' economic reputation took a massive and deserved hit by the 2008/9 banking crisis, recession and grotesque pig trough that followed. It exposed corruption in our system. President Obama made it worse with Dodd-Frank, his massive budgets and green energy handouts; the GOP Congress has been incompetent in resisting it. As a result, voter backlash boiled over this year to produce GOP candidate Donald Trump. Yet, Ryan's coda to the anger-fueled primary is to blaze a trail back to deals hatched in Washington, D.C.'s smoke-filled rooms.

Changing fundamental rules of investing midway through the game is risky. Those rules have already been priced by the market. Doing it so that a political donor can make a buck is dodgy. This behavior scares honest investors. The U.S. is a safe harbor for capital because, in theory, the rules of the game are set, and the economy is a level playing field. It is far more profitable to compete in an open, transparent marketplace than to navigate a web of corruption.

By contrast, Russian President Vladimir Putin presides over one of the most corrupt regimes in history. Last year more than $500mn left Russia while $35bn arrived in the U.S. That kind of economic dynamism is what made us the most powerful nation on earth. Our rules-based economy underwrites our strength and political freedoms.

When we diminish the value proposition of our level playing field, we tarnish some of our shine. Our word carries less weight abroad. Allies look past our moral suasion and crawl into bed with corrupt Chinese officials or Iranian mullahs. A liberal, rules-based free market is the glue that holds the West together and brings dictators to heel. It is no accident that Mikhail Gorbachev chose as the bunkmate for his economic liberalization (perestroika), political openness (glasnost). It is no accident that Adam Smith published Wealth of Nations in 1776. It turns out political freedoms need the oxygen that free markets supply.

I cannot figure out for the life of me why Ryan is doing this, especially since he is already suspect of crony capitalism for bringing back the Export-Import Bank. Giving Puerto Rico the ability to restructure previously non-negotiable debts is a terrible idea. Who knows what will happen as a result of Ryan's chicanery? I doubt instant calamity, but this chips away at whatever facade of a level economic playing field that we have left.

In Wealth of Nations Smith says, " has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour." Indeed. Many of the Trump fans rationalize their fanboy behavior with the notion that Speaker Ryan would keep a President Trump honest. Unless Ryan changes course we will be completely unmoored. We will be entering the next presidential cycle with a House speaker doing favors for hedge fund buddies and two of the most corrupt presidential candidates in history. This is not the scenario Smith had in mind, but, on the other hand, Putin is thrilled.